A SAD Portfolio

By Christopher Shea

Is seasonal-affective disorder shaping your investment decisions? A new study suggests that it could be. Lisa A. Kramer, of the University of Toronto, and J. Mark Weber, of the University of Waterloo, tested the risk-aversion of several hundred people three times — in July 2008, December 2008, and July 2009.

The participants answered questions about depression and other characteristics, and, at the end of each session, either accepted $20 or risked some portion of it to make more money. The most risky bet involved a 50-50 chance to earn $42 (or $0.).

Kramer and Weber compared the subset of people who showed higher levels of depression in winter than in summer (the SAD cohort) to the group that did not. As predicted, the SAD group was significantly less willing to take risks during the winter.

As numerous studies have shown, when it comes to money the average person is already risk-averse to a fault; risk-aversion caused by seasonal depression therefore adds to an existing problem, putting those who suffer from it at a disadvantage.